CMS: Interim ACO, bundled payment savings top $488 million

Liz Seegert

About Liz Seegert

Liz Seegert (@lseegert), is AHCJ’s topic editor on aging. Her work has appeared in, Journal of Active Aging, Cancer Today, Kaiser Health News, the Connecticut Health I-Team and other outlets. She is a senior fellow at the Center for Health Policy and Media Engagement at George Washington University and co-produces the HealthCetera podcast.

The Centers for Medicare & Medicaid Services (CMS) released interim financial results for its various ACO and bundled payment initiatives today which show savings in excess of $488 million.* These included cost savings analyses for Medicare Accountable Care Organizations, Pioneer ACOs, the Physician Group Practice demonstration and expanded participation in the Bundled Payments for Care Improvement Initiative. Many of those programs are discussed in detail in the AHCJ tip sheet “Latest innovations in Medicare.”

“These innovative programs are showing encouraging initial results, while providing valuable lessons as we strive to improve our nation’s health care delivery system,” HHS Secretary Kathleen Sebelius said in a statement. “Today’s findings demonstrate that organizations of various sizes and structures across the country are working with their physicians and engaging with patients to better coordinate and deliver high quality care while reducing expenditure growth.”

CMS said that In their first 12 months, nearly half (54 out of 114) of the ACOs that started program operations in 2012 already had lower expenditures than projected. Of the 54 ACOs that exceeded their benchmarks in the first year, 29 generated shared savings totaling more than $126 million. These ACOs generated a total of $128 million in net savings for the Medicare Trust Funds. Medicare shares in any ACO savings generated from lowering the growth in health costs while meeting high quality care standards.

Final performance year-one results will be released later this year.   

While evaluation of the program’s overall impact is ongoing, the interim results are within the range originally projected for the program’s first year, according to CMS. A great majority of the program’s overall net impact was projected to phase-in over the program’s ensuing performance years.

An independent preliminary evaluation of the Pioneer ACO Model – the ACO model designed for more experienced organizations prepared to take on greater financial risk – also released today shows Pioneer ACOs generated gross savings of $147 million in their first year while continuing to deliver high quality care. Results showed that of the 23 Pioneer ACOs, nine had significantly lower spending growth relative to Medicare fee for service while exceeding quality reporting requirements. These savings far exceed findings from a previous analysis conducted by CMS, which used a different methodology.

Results for the Physician Group Practice Demonstration initiatives, which offered incentive payments for delivering high-quality, coordinated health care that generates Medicare savings confirmed overall savings over the five-year experience with seven out of 10 physician group practices earning shared savings payments for improving the quality and cost efficiency totaling $108 million over the course of the Demonstration. The participating organizations consistently demonstrated high quality of care on a broad range of chronic disease and preventive care measures.

CMS also announced today that 232 acute care hospitals, skilled nursing homes, physician group practices, long-term care hospitals, and home health agencies have entered into agreements to participate in the Bundled Payments for Care Improvement initiative. This approach to reimbursement for services that patients receive across a single episode of care, such as heart bypass surgery or a hip replacement, is one way to encourage doctors, hospitals and other health care providers to work together to better coordinate care for patients, both when they are in the hospital and after they are discharged.

This is the largest and most ambitious test ever of a bundled payment model in Medicare or any other payer in the U.S. Through this initiative, made possible by the Affordable Care Act, CMS will test how bundled payments for clinical episodes can result in more coordinated care for beneficiaries and lower costs for Medicare.

Confused about payment reform? RWJF offers some easy to understand basics about ACOs, Bundled Payments, and Barriers to Payment Reform. You can also view CMS’ specifications for Quality Measures and Performance Standards.

*(Editor’s note: An earlier version of this post referred to savings of $380 million, which didn’t include the $108 million saved by the Physician Group Practice Demonstration initiatives.)

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